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The International Monetary Fund has projected Nigeria’s headline inflation to rise sharply to 37 per cent in 2026.
IMF which issued the forecast in its April 2025 World Economic Outlook report released on Tuesday, said the new projection follows the rebasing of Nigeria’s Consumer Price Index by the National Bureau of Statistics in January 2025, and warned that persistent price pressures and structural constraints would likely keep inflation elevated over the medium term.
According to the Fund, inflation, which averaged 33.2 per cent in 2024, is expected to moderate slightly to 26.5 per cent in 2025 before surging to 37.0 per cent the following year.
The projection, however, has drawn mixed reactions from Nigerian economists, some of whom described the outlook as “excessively pessimistic” and detached from domestic policy realities.
The IMF report also downgraded Nigeria’s economic growth forecast for 2025, citing weakening global oil prices as a major risk to the country’s fiscal and external balances.
The Fund revised its 2025 GDP growth forecast for Nigeria downward by 0.2 percentage point to 3.0 per cent, down from 3.2 per cent. Growth for 2026 was also revised downward by 0.3 percentage point to 2.7 per cent.
The report stated, “Among the larger economies, the growth forecast in Nigeria is revised downward by 0.2 percentage point for 2025 and 0.3 percentage point for 2026, owing to lower oil prices.”
It noted that Nigeria, like many oil-exporting countries in Sub-Saharan Africa, remained highly vulnerable to external shocks, particularly commodity price declines, which continue to affect government revenue, trade balances, and investor sentiment.
Despite maintaining a current account surplus in 2024, Nigeria’s external position is expected to weaken.
The IMF projected that the current account surplus would shrink from 9.1 per cent of GDP in 2024 to 6.9 per cent in 2025, and further to 5.2 per cent in 2026.
This comes on the back of a balance of payments surplus of $6.83bn in 2024, according to data published by the Central Bank of Nigeria.
The surplus was largely driven by a goods trade balance of $13.17bn and a recovery in capital flows.
But analysts have warned that the surplus may not be sustained. Global investment bank JP Morgan said earlier this year that Nigeria could slide into a current account deficit if crude oil prices remain below its fiscal breakeven of $60 per barrel.
Fitch Ratings, however, gave a slightly more optimistic view. It projected that Nigeria’s current account surplus—estimated at 6.6 per cent of GDP in 2024—would average 3.3 per cent over 2025 and 2026, buoyed by improved local refining capacity and continued reforms in the energy sector.
On inflation, the IMF’s forecast follows Nigeria’s decision to rebase its CPI calculations. The National Bureau of Statistics announced in January 2025 that it had updated the base year from 2009 to 2024 to better reflect present-day consumption patterns.
Following the adjustment, inflation for January was recalculated at 24.48 per cent, down from 34.80 per cent recorded in December 2024 under the old base.
The inflation rate declined further to 23.18 per cent in February before edging up again to 24.23 per cent in March, a development that economists attribute to food price spikes, logistics bottlenecks, and foreign exchange volatility.
The Central Bank of Nigeria retained its Monetary Policy Rate at 27.5 per cent at its February meeting, noting the need to sustain tightening in the face of sticky inflation.
With both inflation and money supply rising in March, the CBN may be compelled to consider further hikes in its next policy meeting.
While the IMF did not provide any justification for the inflation projection, Nigerian economists have expressed reservations over the severity of the projection.
Source: Economic Confidential
